mm rpk2 dell

8/6/2019 MM Rpk2 Dell

1/14

AMarketingperspectiveof Dell

computers

June 1

2011 A look into the marketing philosophy of Dell keeping in mind itsbackground, marketing strategy, distribution channels,4ps et al

MarketingManagement Assignment

Submitted to-Rinalini P Kakati

M.B.A. (GAU) PH.D. (GAU)

Teaching areas: Marketing and Finance, Research interests: Forecasting techniques, Financial derivatives, New venturedevelopment

Submitted By Kaustav BhagawatiRoll No 47

MBA 2nd Sem


2/14

Marketing Management assignment- A Marketing Perspective of Dell Computers

Kaustav Bhagawati(roll-47)1

Background -----------------------------------2Dells Strategy -----------------------------------4

Customer Segmentation -----------------------------------6Distribution Channel Strategy -----------------------------------7

Old Economy Commerce:Traditional distribution model-higher distribution cost transferred to consumers -----------------------------------9

Differentiation and Positioning Strategies, and relationship toProduct and Pricing Strategies

---------------------------------10

Marketing Mix ---------------------------------11

Product line-up ---------------------------------13


3/14



Dell was found in 1984, by Michael Dell. His motive was to start a company in order to sell personalsystems direct to customers, and in 1985 Dell Computers introduced its first PC. Dell is a leadingprovider of products and services that customers require worldwide to build their information-technology and Internet infrastructures. Dell holds about 20-25 percent market share in the Swedish PCmarket (Dell, 999). The companys approach is to be innovative and focus on the customers

requirements. According to Dell, they take pride in the fact that they listen and learn from thecustomers themselves and they innovate from there. Dell follows the direct selling model in the IT-market to reach customers and to be the worlds largest manufacturer of IT hardware. Dell has shownits customers that relations including high service by the web are possible (Dell, 2005).

BackgroundMichael Dell started Dell Computer Corporation in 1984 with the idea that there was a better way to sellcomputers. Dell believes that shipping the products directly to the customers will create a much better

level of service and support. Service and support are seen as the ultimate competitive weapons in amaturing industry, and Dell approaches service as a product (Dell, 1994).

In 1985 Dell Computers introduced its first PC. Dell Computer opened up a manufacturing plant inIreland in 1990 to be able to serve the European, Middle Eastern, and African markets. In 1993 DellComputer expanded with new subsidiaries in Australia and Japan, to reach the Asia-Pacific region. In2003 the company changed its name to Dell (Dell, 2005). Dell is a leading provider of products andservices required for customers worldwide to build their information-technology and Internetinfrastructures. Dell holds about 33 percent of the market share in the US PC market (MarketLineBusiness Information center, 2005), and between 20 and 25 percent in Sweden for the first quarter of 2005 (Bohlin, 2005). Dell in Sweden is doing very well, it is gaining market share on desktop computers

and notebooks, as well as enterprise solutions such as new storage technologies. Mats Oretorp,Marketing Director at Dell Denmark/Sweden argued in 2005 that Dell in Sweden will grow +20 percent(M. Oretorp, personal communication, 2005-12-01). Leading market position in most of its markets givesthe company a stronghold within the industry (MarketLine Business Information center, 2005). Dellemploys about 61,400 team members around the world and cooperates with different strategicpartners and industry groups to be innovative and able to develop open-standard products. At themoment, Sweden employs 330 people at Infracity in the north of Stockholm, and Andersson (2005)stated that Dell needs to employ an additional 30 people. This means that Dell needs to extend itspremises. In Sweden Dell is supposed to serve large companies with above 200 employees and thepublic sector. Dell is working in the entire Nordic region but it is Sweden that takes care of the Nordicsupport. Infracity is the only office in Sweden but Dell has further chosen to employ one seller inKarlstad and one in Sundsvall to get closer to its customers. Dells new commitment comes from the bigincrease in PC sales. During this year's first quarter, the sales have increased 7 percent. The increaserepresents the raise in home-PC-sales and the sales in laptops (Andersson, 2005). Dell's innovationsoften affect the IT industry by other companies benefiting from its new product directions (Dell, 2005).


4/14



Only two decades after Dell was founded, its industry-wide phenomenon became known as the DellEffect. The phenomenon explains how Dell has made computing more affordable and associable byrevolutionizing how the world shop for technology. Dell itself calls this idea its winning concept, and it isbuilt on a collective commitment to its customers, direct relationship, global citizenship, team success,

and winning (Dell, 2005). The company recorded revenues of $49,205 million during the fiscal yearended January 2005, an increase of 18.7% in 2004. Strong operating performance provides flexibility tothe company's operations (Dell, 2005). Dell is not spending as much Empirical Framework 36 moneyon R&D as its competitors do. The company only invests about 1.4 percent compared to its bigcompetitor IBM, which is spending almost 6 percent of its revenues. Dell also does very little productinvention but is instead focusing on process innovation. The company is doing that by driving newefficiencies into its manufacturing and distribution of personal computers, servers, and other offerings(Weisman, 2004). Dell is one of the companies that have taken advantage of using short productioncycles and global markets to create new business models and products. Dell has about 60 core suppliersthat allow the company to cycle inventory through gathering facilities in just six hours. Dell uses an

effective direct relationship to its customers which has attracted several customers with different kindsof consumer behaviour (Parks, 2004).


5/14



Dells Strategy

The do - it-thecustomers way mantra has created for Dell the tightest - and most envied - relationshipwith buyers in the PC business - Business Week (Dell, 1999. p2.).

Computer maker Dell is showing the world how to run a business in the cyberage Business Week

(Dell, 1999. p1.).

Scalable Enterprise has three primary pillars:

Products. In just a few years, Dell has grown its product portfolio to include 12 server platforms

(including enhanced blade-based systems), a host of storage products co-developed andmarketed through its relationship with EMC, and new management capabilities as part of itsOpenManage suite.

Alliances. With the creation of its corporate-level enterprise alli ance of ce, Dell now has acentral method of communicating with and attracting new ones. This programs goal is to

DELLS SCALABLE ENTERPRISE


6/14



extend alliances with application partners such as Microsoft, Oracle and SAP, with management

focused partners such as Microsoft and Altiris, and with systems partners such as Intel andEMC.

Services. By making services one of the three core pillars of its enterprise strategy, Dell wants todemonstrate that it has moved beyond support and maintenance into higher value-addedservices in professional and managed services.

The Scalable Enterprise encompasses some, but not all, of the characteristics of SummitStrategies dynamic computing framework. This framework tightly aligns IT and business goalsthrough the use of new infrastructure components and virtualization capabilities, automatedand policy-based service management capabilities, and optimized business processes.

Dell is positioning itself to focus on many of the infrastructure hardware elements of dynamiccomputing and is bringing in partners to solve the major infrastructure software,management and business process challenges of the dynamic computing equation (althoughsome Dell-developed management capabilities are becoming increasingly strategic for thevendor).


7/14



Customer Segmentation Relationship Segment Transactional Segment

Corporate Government and Medium Business Home and Small BusinessLargeCorporateAccounts(LCA)

GlobalCustomerProgramme(GCP)

PublicAcccounts(PUB)

PreferredAccountsDivision(PAD)

BusinessSystemsDivision-Relational(BSDR)

BusinessSystemsDivisionTransactional- (BSDT)

DellHomeSales(DHS)

Consists of large local

and foreigncorporationbased onannualrevenues

Internatinalcorporations

withcentralizedpurchasecontrol

Federal Stateand govt

ministries,depts.,agencies andeducationalsector

Localmedium

sizedcompaniescategorizedby annualrevenuesandemployeesize

Local small businessescategories by annual revenue

and employee size

Individuals of

homeusers


8/14



Distribution Channel StrategyDell has shown its customers that relations through the web are possible. Dell follows the direct-sellingmodel in the IT- market to reach customers and to be the worlds largest manufacturer of IT hardware

(Dell, 2005). To do everything direct enables Dell to be faster than everyone else using physical assetssince the company has fewer things to manage and fewer things that can go wrong (Magretta, 1998).However, it has not always been like that. When Dell started, it used personal selling, telephone, andlater on, the Internet. It was in 1994 when the retail- business was growing the most and all Dellscompetitors expanded into the retail-business. That is when Dell decided to go in another direction. InUSA Dell sold its products to big chains like CompUSA and Circuit City for four years, but in 1994 thecompany decided to do something about the fact that their products did not make any profit whenselling through retailers. Dell did one last try to sell at Wal- Mart, USAs biggest supermarket chain,before pulling out of the retail business in 1994 (Dell, 1999). Dell is a very demand-driven company. Thecompany integrates demand in its supply chain by shipping its products servers throughout Europe, the

Middle East, and Africa, from its manufacturing facility in Limerick, Ireland. The company is trying tointegrate suppliers, plants, and logistics networks. It is important for Dell to understand its customers tobe able to keep as little inventory as possible in that way save money (Wheatley, 2005). Dell is using theinformation and technology to reshape the traditional borders in the value chain betweenmanufacturers, users, and suppliers. Michael Dell calls this virtual integration. It is about how tocombine mass-cutomization, partnership with suppliers, and just-in-time manufacturing in the mostsufficient way. Virtual integration means customers needs can be met faster and more efficiently. For

Dell it is all about shrinking the time and the resources it takes to meet customers needs.

One of three PCs in the USA is shipped by Dell, and one of six in the world. Dell is using a standard-

based-approach. That will make the company the lowest cost producer of standard technology. Dell hasno requirements to do everything itself and is very careful when setting up production facilities.Location decisions are high on the corporate radar, especially since they have a business model thatcontains low prices and quick delivery, coupled with responsiveness to the customer. Dells mainadvantage is its consistent ability to exe cute a clear strategy (Stewart & OBrien, 5).

Dell is able to offer its customers value through high-quality, relevant technology; customized systems;superior service and support; and products and services that are easy to buy and use. This is due toDells strategic focus on a direct customer model, o ffering standard based technologies with an efficientmanufacturing and supply chain management organization. This helps Dell to cut the cost (since having a

small inventory) and be able to introduce the latest technology faster than its competitors with slowmoving indirect business models. The model will also make information technology more powerful andeasier to use, not to mention more affordable. Customers are given an opportunity to take advantage of powerful new tools to improve their businesses and their personal lives. Online relationships are themain focus in Dells strategy, and a lot of other c ompanies now start to see the benefits of direct-sales.There is a lot of money to save when only selling on the web. The custom ers habits lead more towardsshopping on the web to make the purchase as easy as possible. The direct model allows the company to


9/14



build every system to order and offer its customers great systems for competitive prices.

Thomas Rundin (2005), Market director at Dell in Sweden, explains that Dell has always sold directly tocustomers and that they will continue to do that forever. The reason for that is to be able to be close tothe customers and to be in the middle of the flow of information. As mentioned earlier Dell tried to sellthrough resellers in 1994, but they ended that idea very fast. The reason was that Dell was not able toknow what the customers wanted and that destroyed the whole business concept to keep track oncustomers prefer ences. The company did not know how much inventory the resellers had or how muchthe customers bought, and also the resellers demanded some kind of margin. According to ThomasRundin, selling directly to customers will lead to lower prices

Many companies have adapted to the new invention of the Internet but not a lot of companies havechosen to do like Dell and only focus on direct relationships. Dell differs from its competitors bycommunicating its brand value using its website as a direct sales channel. Dell also differs in the waythat it manufactures its computers from scratch for its customers. Dell builds relationships through its

own sites while several of its competitors use corporate sites that force the user to a retail space orthird-party, not through their own factories. Dell knows that direct contact with customers assureshigher quality and value for the customers who will get answers to their questions. To use a third partywill create an insecure feeling since it is not always possible to control how much knowledge the thirdparty has about the manufacturers products. In Dells case the manufacture rs sell the productsthemselves. Dell enters new partnerships all the time to be able to keep up with top players whilemaintaining a strong operating base. The company has identified three product areas where theybelieve that growth and profitability are important and attractive: consumer electronics, storage, andprinters. Dell has decided to opt into a partnership with companies in the mentioned areas in order togrow as much as possible (Wallstrm, 2005). They want to be able to offer best possible service. Dell

believes in having as few partners as possible, and to only keep them as long as they are the leaders intechnology. Nonetheless, as long as they remain partners Dell will treat them as if they were inside thecompany. One of the advantages of working close with its suppliers is that about 10 000 servicetechnicians service Dells products but only some of them are actually working directly for Dell. That is

because most of them are contractors. Although most customers believe that the technician that comesto their home is actually working for Dell, which is an advantage for Dell.


10/14



Sells at RM160

Margin RM60B2B E commerce

B2B E commerce

Sells at RM200

Margin=RV60

Sells atRM140Margin=RM40

Assembly Cost=RM 100

Old Economy Commerce:Traditional distribution model-higher

distribution cost transferred to consumers

Delivery fulfillment of a)Built-to-order goodsb)Finished Goods

Transfer of built-to-order goods

B2B E - commerce

E-commerce:Direct Distribution Model1)Lower Distribution Cost2)Consumer benefits from economies of scale indifferentiation and low cost leadership translated into

-best value-high quality and most relevant technologyCustomized systems-tailored service and support--products and services that are easy to buy(24x7)and use

Traditional Salesand marketinginermediaries

End-users

Traditionalassembler

Logistics andinventory hubservice

Telesales &Field sales

CybermediaryDELL

Suppliers(RawMaterials andcomponents)


11/14



Differentiation and Positioning Strategies, and relationship to Product and Pricing Strategies

With the Dell Direct Model, Dell does not only strategize to be the low cost leader of computer

hardware products, but also differentiates its computer hardware offerings, ranging from PCs

and notebooks to workstations and servers to other peripherals such as storage, network

switches, printers, enterprise software, etc.

Further product differentiation at customer level is possible via ChoiceBoards available during

the online buying process that enable customers to self-select or change the product

configurations for e.g. opting for 512MB of main memory instead of the default 256MB main

memory, or selecting a 80GB hard disk instead of the offered 60GB hard disk, or to include a

colour inkjet printer. ChoiceBoards enables mass customization.

A differentiation strategy requires the products and services to become differentiated for

different customer segments, thus again this results in and support the need for a dynamic

pricing strategy. With the Dell Direct Model, Dell positions itself as engaging the customers

directly without traditional sales channel intermediaries. Dell develops direct relationships with

the customer in order to:

Establish the most efficient path to the customer

Become a single point of accountability

Develop build-to-order efficiencies

Become a low cost leader


12/14



Offer standards-based technologies

Marketing Mix:

Dells New Marketing Strategy in India

Dell is targeting the small and medium businesses (SMB) in smaller towns in India as its

main driver for growth as the company believes this market sector is growing rapidly

and is not exposed to global shocks making it a much more stable market. Dell India is

focusing on simplification of the business processes (basic areas to improve cost

efficiencies) as part of its new rollout plan. It has even tied up with Tally to offer

accounting solutions online. For an initial period, customers get a Tally subscription

free along with select Dell Vostro systems. Dell has also increased its SMB team to 200

and expanded its presence to about 600 tier-II and tier-III cities. Dell will also introduce

a portal titled Dell 360 (with discussion forums) where SMBs can educate themselves

on benefits of IT to their businesses.

Product: Dell sells high technology products that are hard to replace. Low-replacement goods(high gross-margin, high adjustment factor, high consumption period and high search-time goods)require direct distribution. the more a product requires technical knowledge for the sale, installation,

maintenance, and repair service, the more it should be sold through a direct and selective channel.Indeed, when middlemen are used, they must be able to provide the service. Dells strategy sticks with

this approach.

Pricing:Dell wants to have low prices to satisfy its customers who are price-sensitive thanks to its direct sellingstrategy, Dell is able to offer its customers low prices while they keep a high level of quality thanks tolower costs.

Promotion: indirect distribution requires the use of mass media, since the manufacturer hasminimal personal contact with the ultimate market. the objective of Dell in advertising is aboutpromoting its website. "The role of both offline and online media is to generate phone calls and Webvisits," says Greene (2005). "The majority of spend is offline, but we have spent a lot of time on ouronline ad strategy and know how best to use our ad spend." (Cited in New Media Age, 2005, p.20). Dellnot only advertises with banner ads, affiliate and e-mail marketing, it also operates a direct advertising


13/14



strategy based on sales (New Media Age, 2005).

Dells New Advertising Campaign for SMBs

First launched in India, Dells new advertising campaign is titled Take Your Own

Path . The campaign targets Indian SMBs with a new range of laptops.

Testimonial Advertising instead of Transactional

In December 2007, Dell partnered with WPP (after withdrawing its advertising

responsibilities from over 800 different agencies worldwide) which launched its own

specialist unit Enfatico with Dell as its only customer. Enfaticos first international

campaign for Dell targeted SMBs featured successful Indian faces (like P Rajendran

NIITs co -founder and COO, Raman Roy CEO of Quattro among others with their

testimonials) and aimed at establishing an emotional connect with brand Dell.


14/14



Product line-up

mm rpk2 dell

Documents